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VA Mortgage after Foreclosure

Friday, January 13, 2012 - Article by: VAMORTGAGE411 - Integrity Mortgage Group - Message

Qualifying for a VA Loan after Foreclosure

A frequent question among borrowers is whether they can qualify for a VA Loan after suffering a foreclosure on a previous mortgage.

The VA Home Loan Guaranty Program's qualifying guidelines are very clear when it comes to a borrower with foreclosure history. Since repayment practices on past debts are the best indicators for willingness to pay future debts, a prior foreclosure can prevent someone from qualifying for a veterans' mortgage. However, a foreclosure does not make it impossible to qualify.

The U.S. Department of Veterans Affairs provides for a two-year recovery period from the date of foreclosure during which the veteran is not eligible. Thereafter, it is possible to qualify, however a borrower with a foreclosure in their past may have to answer more questions on the mortgage application when it comes time to borrow again. VA-approved lenders have authority to establish higher standards for approval.

In short, when a non-VA mortgage is foreclosed or a deed is given in lieu of foreclosure, then the veteran would not be eligible for a VA-backed mortgage for at least two years. A borrower can use the two-year waiting period to reestablish credit and show willingness and ability to pay future obligations.

If the foreclosure involved a VA loan, then not only must the borrower wait two years and repair credit before reapplying, but entitlement is affected as well. In order for a VA borrower to have full entitlement restored after foreclosure, he or she must repay the loss (the guarantied amount) suffered by the VA as a result of the foreclosure before being considered for another VA mortgage. If the entire amount of the loss is repaid, then the VA borrower may have full entitlement restored.

We are dedicated to serving your VA Purchase and Refinance needs.

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